Explosive storage, outstanding performance! Samsung Electronics' Q1 operating profit may increase sixfold to reach a record high, close to last year's total for the whole year.

Benefiting from the surge in chip prices driven by the artificial intelligence boom, Samsung Electronics' first-quarter operating profit is expected to increase sixfold, hitting a quarterly record high and approaching its full-year profit from the previous fiscal year. According to LSEG data, analysts forecast that spurred by an "unprecedented super cycle" in storage chips, Samsung is expected to announce a 50% revenue growth and a profit of 40.5 trillion Korean won (approximately $269 billion) next Tuesday. In comparison, the global largest storage chip manufacturer's operating profit last year was 43.6 trillion Korean won. Some analysts are even more optimistic, with Citigroup predicting an operating profit of 51 trillion Korean won. "The situation couldn't be better," said Ko Yeongmin, analyst at Daol Investment & Securities, referring to the strong momentum in the storage chip market. Effects of the war Despite the expected significant profit growth, investors may be more concerned about the impact of the Middle East war on Samsung's growth momentum. However, Samsung typically does not talk much about performance outlook until later this month when it releases a more detailed profit analysis report. The war has pushed up energy costs and may disrupt the supply of crucial production materials, which could in turn force large tech companies to cut investments in artificial intelligence data centers. Additionally, as device manufacturers increase prices of smartphones, computers, and other products, suppressing consumer demand, there have been signs of a slight decline in spot prices of DRAM (Dynamic Random Access Memory) chips. These concerns, along with Alphabet Inc. Class C's (GOOGL.US) release of memory-saving technology TurboQuant last month, have led to a sell-off of memory chip stocks. Since the outbreak of the Iran war on February 28, Samsung's stock price has fallen by 14%. Nevertheless, boosted by multi-billion-dollar investments by large tech companies in artificial intelligence, Samsung's stock price has risen by 50% year-to-date. Chip shortage persists Some experts remain optimistic about the outlook, noting a severe shortage of memory chips. Tobey Gonnerman, President of semiconductor distributor Fusion Worldwide, stated, "In the past three to four weeks, we have seen a slight decline in spot prices of memory chips. But we believe this is temporary. Demand and backlogged orders remain strong." He added that it takes a long time to fulfill total demand for memory chips. Market research firm Trendforce also projects that traditional contract prices for DRAM chips will continue to soar. First-quarter contract prices for DRAM chips doubled from the previous quarter, and are expected to rise by 58% to 63% from April to June. Samsung Electronics' Co-CEO Young Hyun Jun told shareholders last month that the company is collaborating with key customers to extend contract terms to three to five years to protect them from potential demand fluctuations. Other businesses While Samsung's storage chip division will contribute the majority of its profits, its other businesses are expected to face challenges. Analysts anticipate that Samsung's chip foundry business (competing with Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US)) will continue to operate at a loss. However, the department recently partnered with NVIDIA Corporation (NVDA.US) to jointly develop a new type of artificial intelligence inference processor, providing it with a boost. According to Kiwoom Securities' prediction, due to rising storage costs and intense market competition, Samsung's smartphone and LCD display divisions may see profits drop by nearly half in the first quarter. Additionally, Samsung may face challenges of rising labor costs, as its unions in South Korea have demanded reforms to the bonus system and threatened to strike in May.